June 18, 2024

People Count With Marcela Pinilla, Director of Sustainable Investing at Zevin Asset Management

Dan Berlingeri:  

Hey there. Welcome to People Count, a DiversIQ Podcast where we talk about workforce diversity and human capital management from a data lens. DiversIQ is the leading provider of human capital and DEI data for the largest publicly traded companies in the world. We provide the most comprehensive dataset focused on DEI, human capital, and other social factors affecting the materiality of company culture, employee retention, and inclusion. I’m Dan Berlingeri, and today I am joined by Marcela Pinilla, currently serving as Director of Sustainable Investing at Zevin Asset Management. Marcela, how are you doing today?

Marcela Pinilla:    

Great. Thank you for having me today. I’m in Brooklyn, New York, enjoying a wonderful spring Friday. So very happy to be speaking with you, Dan.

Dan Berlingeri:  

Of course. We schedule these intentionally on Friday. Everyone’s at their best.

Marcela Pinilla:    

That’s why. Their best mood on Friday. That’s exactly right. I’m excited about the weekend. We have a whole week under our belt. Mm-hmm, and lots to talk about. 

Dan Berlingeri:  

Marcela, just curious for our listeners, would you give us a little bit of your background?

Marcela Pinilla:    

Of course. So I am now Director of Sustainable Investing at Zevin Asset Management, and I’ve been in this post for just over three years. Before that, I worked in the same space. I’ve been in this space for about 17 years now, working with different managers. I worked with an asset owner, Mercy Investments. I worked with a manager of managers at CBIS and at Boston Trust Walden as an analyst, and an advocate. So I’ve had training and I’ve gotten to work with some stellar people in the industry. Now, at this job at Zevin, I do our research for our investment committee meetings, deciding whether we want to own a company or not, and what advocacy and impacts are helping us make that decision. We also do our advocacy year-round, so it’s something I’m involved in a lot.

Dan Berlingeri:  

Hmm. That’s amazing. I mean, you have such a breadth of experience and you’re collaborating with so many other companies and organizations. What initially brought you to do this work?

Marcela Pinilla:    

I didn’t know the work as I know it, especially on DEI, existed when I first entered this space. It didn’t have a name. We’ve come a long way in voicing what matters to investors after we have, as a society, processed what it is that we need to be doing to track corporate impacts and corporate risks in a more refined way. Data isn’t everything, but I was fascinated by the intersection of business and sustainable development. That’s my MBA that I got from the Heller School, one of the first MBAs that combined these disciplines. So the interdisciplinary, multiple threads and interconnected topics that exist in this space are enormous. We didn’t have great data. I wanted to be in the space because I thought, “Wow, here’s a place that is fascinating and where we can bring some change.” I could see how research and public policy research could equip an investor, and how stakeholders who are at the front lines of the impact are probably the people who will best know what those solutions are. So how do I link all of this to find this field, I’ve been in it ever since.

Dan Berlingeri:  

You’re making a great sell for the field, a great sell. You’re convincing me. Well, fantastic. I’m sure a lot of our listeners would relate to that too. Just curious, through your breadth of experience, what are some of the major trends that you feel you’ve learned from this space, or maybe some of the harder lessons you’ve had to learn given your experience that you can share with some of our younger career listeners?

Marcela Pinilla:    

Well, trends and lessons. I’ll start with the trends. As I was saying, data has come a long way. Investors, civil society groups, and, you know, with the SEC somewhat, sometimes moving towards more disclosure has made things possible where we didn’t think it would be. Climate risk is an issue that’s included in 10-Ks is the effect of collective years of work, right? Now, the Human Capital Management Coalition and many others are writing letters to the SEC to include metrics related to turnover, related to what type of employee are you. Are you contingent? Are you direct? What are the statistics broken down by gender, race, and ethnicity? 

That sort of disclosure, 15 years ago, was not even something we could advocate for. We were very busy advocating for companies to disclose their equal employment opportunity reports, right? I think by now, most S&P 500 companies do, and that’s thanks to the collective efforts of investors, asset owners, and stakeholders. I’ve learned to be patient. I think that over time, you do see that no action is without consequence. Every action has an impact, and every contribution that you make as an investor who is advocating for an issue that is material to long-term business success, you start to see the importance of disclosure. A drawback of that is that it doesn’t end there. That’s a hard lesson in a way. We’re never done. This work continues. Whether you’re an analyst looking at companies strictly from a materiality point of view, we look at impact as well. More and more, we’re starting to see the outcomes we want to see. Not just “give me this data,” but change it now that you can see where the gaps are. Close them now, where now that you see that your frontline workforce is, you know, majority Black women. In the case of the frontline workforce, right? Black and brown women are overrepresented. We know so much now that we cannot just stop at what we are asking for because there are structural problems. I think we’re going to talk a little bit about the headwinds that we’re seeing.

Dan Berlingeri:  

Yeah, we would love to.

Marcela Pinilla:    

We’re going to talk about that too. The lesson is that you cannot stop at disclosure and hope that things are going to correct themselves.

Dan Berlingeri:  

Right. It sounds like everyone points to the tired adage, “You can manage what you can measure,” but truly, I think that is the greatest tool we have in this space, getting more access to better quality data that you can then define as more tangible to companies. More material, coming back to companies with more specific asks, guidance, and advocacy. I know that we experience that within all intersections of this space, whether it be sustainability, responsible investing, DEI, better human capital management strategies in general, or internally in companies. Overall has been a downhill, snowball effect around the necessity for better quality and more breadth of data to work with. 

Curious to hear, what are some of the challenges you feel like you’re running into over these last couple of years, maybe this year in particular? Maybe some of the pushbacks as it pertains to your work and the different intersections you spoke to as well.

Marcela Pinilla:    

Dan, do you mind breaking that question down a little bit further? Like there’s a first and second part?

Dan Berlingeri:  

Yeah, yeah. Just from your seat, what are the main challenges that you are encountering, whether it be from the corporates you’re speaking to, or from the clients you work with?

Marcela Pinilla:    

Wow, there are so many areas I want to touch on. This year’s election is a headwind for us and for industry efforts to bring the United States on board with global climate commitments, et cetera. That’s a definite challenge. 

The retraction of big institutional investors and just efforts around sustainability and DEI have retreated. It’s a challenge, but it’s also a way to see that things are readjusting. We had this huge growth and mainstreaming of ESG, and now we have the separation of the wheat from the chaff. We’re just looking back and seeing that big institutional investors withdrawing their votes on important proposals related to climate resulted in some really poor outcomes vote-wise. That has had a chilling effect because that is the sharpest tool that investors have, to use their voices in shareholder proposals. If votes are going down, that is a signal. 

I’m not too worried about that in the sense that we are continuing our work. Shareholder rights are tenuous right now, but that’s no reason to pause. It’s also not a reason to fight back the anti-ESG. Their arguments are so baseless that it’s hard to even fathom how to talk reason. We are just doing our work, and it is difficult to think we can keep doing things the way we do them without really taking into account this changing environment.

Dan Berlingeri:  

Can I respond to that last thing you just mentioned? I thought that was a fantastic point. I can’t remember who said this recently, but probably a lot of people I speak to have said, “The evidence of friction or pushback is evidence of effectiveness.” The more pushback we experience is evidence that our efforts are potentially working, yielding some actual concrete change. You also pointed to this other point, which is that we’ve had this overabundance of approaches and strategies in the market. In a way, maybe it’s being challenged more, it’s effective, and we’re clarifying what is material. As a space, how do we point to impact more concrete, more tangibly? In a way, that has become a positive, sharpening that tool.

Marcela Pinilla:    

Yeah, I like that a lot, that we have come to be so important to the Republican party as an industry. It does point to us being effective and to the importance of continued shareholder advocacy. One worrying trend is that the big shops, the much bigger managers, might have all the good intentions of engaging and changing companies, but there’s not a lot of visibility into it. There’s not a lot of evidence of alignment of their engagement work with proxy voting outcomes. I worry that as we are recalibrating, we’re all getting smarter. I don’t want to say we all want to be more authentic, but I think that’s going to be the prevailing sign of a lasting presence in this space. We need to continue to do our work, stay with the times, and stay ahead of all the criticisms and discrediting. It’s a good thing, too. What I think is a little worrisome is that the customers or the clients, or whoever’s buying, might not be catching up to this expose we’ve made of all these institutional investors. Look, they’re not walking the talk, and here’s why. Will they get smart and make the right choices for what is being offered, the value they’re being offered?

Dan Berlingeri:  

These headwinds have the power to shape and shift our trending market, especially on the precipice of an election. It’s so hard for our consumers to not be pulled by the undertow of that and swayed off-center. You were about to mention the structural challenges that you wanted to address. I would love to hear more about that.

Marcela Pinilla:    

Yes. This is a present challenge, but also a prevailing challenge: the structural problems in labor, inequitable workplace practices, job misclassification, or job segregation. It’s a structural problem. For one, I’ll start with the structural issue and talk about inequitable workplace practices. Structurally, companies traditionally see labor as an expense. Wherever they’re cutting, you’ll see in the 10-K, they’re cutting wages here, doing layoffs here, or cutting back the overall number of hours that will be given to employees. That just is not a sustainable business model. Despite all this pressure, that’s a structural accounting change that needs to happen. Until then, there’s the direct workforce and the indirect workforce of a company. The only thing companies need to report is their direct workforce, which might be of a certain size, 100,000 people, but without reporting their extended or contingent workforce, you might have 50,000 or 100,000 employees working for the company but not directly. They’re hired through a third party or like temps. They’re a so-called supplier. Structurally, we’re already like in the case of Uber.

Dan Berlingeri:  

Where their drivers are contracted. Is that correct?

Marcela Pinilla:    

Exactly. In tech, it’s very prevalent. Uber, Amazon, Alphabet, and Microsoft all started in a small space, like out of a garage. They needed to hire more people temporarily for certain things. But then that has persisted and created huge gaps between the direct employee and the contingent employee who might be doing the same amount of work but getting paid differently and not getting the same benefits. It’s good for investors to note that not all companies are going to disclose. They’ll tell you they hire contract and temp workers but not how many or what practices are there. It’s an important question if we are really looking at DEI holistically and comprehensively. 

The other thing I wanted to talk about is the inequitable workplace practices that are a challenge to the success of the outcomes on DEI that we want to see. For example, if companies keep non-competes in employment contracts for frontline workers, that is suppressing job mobility. A non-compete prevents an employee from going to work for a competitor or within a certain radius of, you know, 50 or 100 miles. This used to work for tech executives, but it has trickled down to the frontline workforce. The job mobility problem and wage suppression are also problems because it’s difficult to bargain for a higher wage if you cannot interview elsewhere. Typically, frontline jobs don’t have a pathway to growth. The economic case is there for why this workplace practice is not equitable. Removing this barrier would help unleash wages and facilitate job mobility, both essential for reaching DEI outcomes.

Dan Berlingeri:  

That’s fantastic. I have a lot more to say, but let me pause here. Dan, I hope that is answering part of your question.

Dan Berlingeri:  

Oh, yeah, no, that, I just, your experience and your focus here is, I so appreciate it. I think every company and asset manager has their own focus and their own secret sauce, so to speak. You wear many hats. You do all your own research. You are in the weeds. You are on the front line with your own shareholder engagement. You see it all. It’s really great to hear that perspective. 

I wanted to comment on one thing on the contractor side as someone who worked in HR. I can’t tell you how many times I’ve heard from team department heads who have used discretionary budgets to hire a few more contractors onto their team. HR was completely unaware of it. It’s not regulated. It doesn’t need to be reported. HR doesn’t always find out about it until much later on. We need to make some progress there for sure. We need to make some progress to measure it.

Marcela Pinilla:    

Yeah, and look, there has been some recent progress where the FTC banned non-competes. So they’re banned now, and that means companies will need to withdraw, and rescind non-competes in employment contracts. What is going to matter is the outcome of this lawsuit that the US Chamber of Commerce has filed with the FTC saying that the FTC does not have the authority to do its job, which it does. Investors like us are gathering other investors to build up assets under management to submit comments from investors so the judge understands that there’s a clear economic and business case here. Like I said, it doesn’t end. So, non-competes may be banned, but we’re now going to try to keep it that way.

Dan Berlingeri:  

Excellent. Where do you see things going? I know we’re reaching the end of our time. I’d love to spend some time on what your hopes are for this space, and what your aspirations are.

Marcela Pinilla:    

Yes. I like this question because as much as there are headwinds and challenges in the long term, I think we are moving towards being a better human race, being a better society. My hope is that the work and contributions we make through Zevin and with others will continue to keep us on that pace because we cannot lose sight or hope of what we want to see: worker voice. The last year of unionizing has been encouraging in some ways, but in others, the pushback from companies is enormous. Freedom of association is crucial. You cannot have good DEI without freedom of mobility and association. I’m hoping that worker voice will get more integrated. Ellen Frank Miller founded a group called Workforce and Organizational Research Center, and she says that workplace equity and quality jobs, just the quality of a job, are mutually dependent things. You can’t have one without the other. With that in mind, we need to expand our panorama, to move beyond representation of women on the board, for example, but to go deeper into what a good job looks like and take input from the people who know the solutions. It’s very fascinating research because we know that when you have better workplace standards, you have fewer accidents, less absenteeism. When you have higher wages, you have better outcomes all over. When you can call a good job a good job and have a worker say, “This is a good job,” that’s when we know that we’ve done things right. I say “we” as all the people who have an interest in improving corporate performance on workplace equity. I don’t know what it will be called in 10 or 20 years, but I do think we are starting to articulate better what we want to see. What do stakeholders want to see? With the caveat that you cannot standardize something as important as racial equity, as the sense of belonging. Let the employees tell you if they’re happy, and that’s the best litmus test. Worker voice.

Dan Berlingeri:  

I spoke to a DEI consultant recently who said that your marginalized communities within a workforce could be an opportunity to listen to as a bellwether, a signal of the winds and a health check on company inclusion and culture. They’re often the first groups of workers who will sense if something is off. I think there’s a lot more progress to be made in terms of how we think about DEI holistically. Integrating how we measure things like the E and the I will help us point to more materiality. We’ll build a better case for DEI practices for corporate governance in general, for workers’ rights, all the goals we’re chasing. It will sharpen those tools even more.

Marcela Pinilla:    

Yeah. Dan, I’m sure your audience might recognize some of these, but retention and promotion of employees, broken down by gender, race, and ethnicity, is one way we can see if employees, once they’re recruited, stay. Then there’s the pay gap exercises that we ask companies to do. Workforce disclosure, material workforce disclosure, is important. We’re capturing only a limited scope of employees. Encouraging that disclosure can help us better understand the risks a company is facing and use our investor voice to channel what employees want.

Dan Berlingeri:  

Right. Expand the panorama of what we are looking at and considering. Some of the folks we work with today are looking at things like pay equity as one of the purest signals of company inclusion, behaviors of inclusion. It’s encouraging to hear that focus.

Marcela Pinilla:    

Yeah, and Dan, if we are looking at boards and we want to see women and people of color represented on those boards, the next step is, well, how much is there pay equity among those voting members? Are their votes also having equal weight? There’s always the next step to really better understand. Those are some of the indicators that I believe you track with DiversIQ, and it’s really up to active investors to push companies to provide that information for the benefit of investors and anyone who wants to understand the company.

Dan Berlingeri:  

Yeah, we put a lot of effort into tracking and expanding the dataset

 on human capital, particularly on pay equity, turnover rates, retention, new hiring, internal mobility. Those are all the output numbers of a good culture. Thank you for shouting that out, and we love partnering with you. We love partnering with Zevin, so thank you.

Marcela Pinilla:    

Likewise. Looking forward to continuing to do that work.

Dan Berlingeri:  

Of course.

Marcela Pinilla:    

Great. Dan, it’s always good to speak with you, and thank you for your questions.

Dan Berlingeri:  

Of course. Thank you for your time today, Marcela. We hope you enjoyed today’s episode. For our listeners, if you liked this content, there’s plenty more to check out at DiversIQ.com. That’s D-I-V-E-R-S-I-Q dot com. We have blog articles, white papers, and webinars on topics like this, and if you join our newsletter at DiversIQ.com/newsletter, we’ll send you all of those things directly once a week. Thank you so much for listening. Marcela, do you have any final thoughts for us before we sign off?

Marcela Pinilla:    

I’ll leave it with, I hope everyone listening has good takeaways to take back to your work on social equity in general and DEI and racial justice.

Dan Berlingeri:  

Excellent. Thank you, Marcela. Enjoy your weekend.

Marcela Pinilla:    

Thank you, Dan. Likewise. Take care.